Money laundering penalty for former crypto bank Silvergate
US authorities impose a fine of tens of millions of dollars on the former Silvergate bank and two managers. Precautions against money laundering were lacking.
(Image: Olga Donchuk/Shutterstock.com)
As the "leading bank for business & crypto" according to its own statement, Silvergate Capital served the cryptocurrency industry for years. The SEN (Silvergate Exchange Network) payment system, which enabled fast transfers between customers around the clock and thus also to cryptocurrency exchanges such as FTX, was particularly popular. However, the prescribed precautions against money laundering were lacking. Silvergate has now been fined millions for this.
According to the authorities, more than one trillion dollars was moved without verification; investigators have identified more than nine billion dollars in suspicious transactions between Silvergate accounts of the collapsed cryptocurrency exchange FTX alone. The Board of the US Federal Reserve imposes a fine of 43 million US dollars on Silvergate(In the Matter of Silvergate Capital et Silvergate Bank, Ref. 24-013-CMP-HC and 24-013-CMP-SM). The California Department of Financial Protection and Innovation added another 20 million dollars. This makes a total of 63 million dollars.
Additional SEC proceedings
Further proceedings have been initiated by the Securities Exchange Commission (SEC). Strictly speaking, this is not about the failure to combat money laundering per se, but about the allegation that the bank managers made false claims to investors that they were monitoring the transactions of their crypto customers and operating an effective anti-money laundering system. Such untrue claims would be unlawful as misleading investors. In addition to the company Silvergate, its former CEO and the manager responsible for anti-money laundering at the time are also being sued.
In addition, the SEC is making a further allegation of misrepresentation against the former bank and its former CFO: Silvergate had significant debts that fell due at the beginning of 2023. The CFO is alleged to have deliberately made false statements to his investors about the extent to which the bank would have to sell securities in order to service the debt.
With fines of one million against the CEO, a quarter of a million against the money laundering manager and 50 million dollars against Silvergate, the SEC is discontinuing the proceedings. However, the 50 million will not flow, as Silvergate's payments to the central bank and the Californian authority will be offset against this.
"Successful conclusion"
Silvergate accepts all penalties and speaks of a "successful conclusion" to the investigations. Silvergate has pleaded neither guilty nor not guilty to the SEC. The company has resigned its banking license. As a result of the collapse of the cryptocurrency exchange FTX, Silvergate ceased customer operations last year and refunded all lost deposits. According to a public notification to the SEC, there was still money left over; however, the amount is not clear from the notification.
The CEO and the manager also accept the fines imposed, as well as a five-year ban from working in the financial sector. The pending approval of the Federal District Court for the Southern District of New York is likely to be a formality. The SEC's proceedings against Silvergate's CFO are pending before this court(SEC v Silvergate Capital et al., Case No. 24-cv-04987). The authority has requested a jury trial.
- Klageschrift der SEC gegen Silvergate Capital und drei Ex-Manager
- Strafbescheid des Board of Governors of the Federal Reserve System gegen Silvergate Capital und Silvergate Bank
- Vergleich im Verfahren Commissioner of Financial Protection and Innovation v Silvergate Capital et Silvergate Bank
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